INVESTMENT MANAGEMENT TRUST AGREEMENT
This Agreement is made as of _____________, 2005 by and
between
Paramount Acquisition Corp. (the "Company") and Continental Stock
Transfer &
Trust Company ("Trustee").
WHEREAS, the Company's registration statement on Form
S-1, No.
333-_______ ("Registration Statement"), for its initial public
offering of
securities ("IPO") has been declared effective as of the date
hereof by the
Securities and Exchange Commission ("Effective Date"); and
WHEREAS, EarlyBirdCapital, Inc. ("EBC") is acting as the
representative of the underwriters in the IPO; and
WHEREAS, as described in the Registration Statement, and
in accordance
with the Company's Certificate of Incorporation, $45,050,000 of the
gross
proceeds of the IPO ($52,164,500 if the underwriters over-allotment
option is
exercised in full) will be delivered to the Trustee to be deposited
and held in
a trust account for the benefit of the Company and the holders of
the Company's
common stock, par value $.0001 per share, issued in the IPO as
hereinafter
provided and in the event the Units are registered in Colorado,
pursuant to
Section 11-51-302(6) of the Colorado Revised Statutes. A copy of
the Colorado
Statute is attached hereto and made a part hereof (the amount to be
delivered to
the Trustee will be referred to herein as the "Property"; the
stockholders for
whose benefit the Trustee shall hold the Property will be referred
to as the
"Public Stockholders," and the Public Stockholders and the Company
will be
referred to together as the "Beneficiaries"); and
WHEREAS, the Company and the Trustee desire to enter into
this
Agreement to set forth the terms and conditions pursuant to which
the Trustee
shall hold the Property;
IT IS AGREED:
1. Agreements and Covenants of Trustee. The Trustee hereby agrees
and covenants
to:
(a) Hold the Property in trust for the Beneficiaries in
accordance
with the terms of this Agreement, including the terms of Section
11-51-302(6) of
the Colorado Statute, in a segregated trust account ("Trust
Account")
established by the Trustee;
(b) Manage, supervise and administer the Trust Account
subject to the
terms and conditions set forth herein;
(c) In a timely manner, upon the instruction of the
Company, to invest
and reinvest the Property in United States "government securities"
within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940
having a
maturity of 180 days or less, or in any open ended investment
company registered
under the Investment Company Act of 1940 that holds itself out as a
money market
fund meeting the conditions of paragraphs (c)(2), (c)(3) and (c)(4)
of Rule 2a-7
promulgated under the Investment Company Act of 1940;
(d) Collect and receive, when due, all principal and
income arising
from the
Property, which shall become part of the "Property," as such term
is used
herein;
(e) Notify the Company of all communications received by
it with
respect to any Property requiring action by the Company;
(f) Supply any necessary information or documents as may
be requested
by the Company in connection with the Company's preparation of the
tax returns
for the Trust Account;
(g) Participate in any plan or proceeding for protecting
or enforcing
any right or interest arising from the Property if, as and when
instructed by
the Company to do so;
(h) Render to the Company and to EBC, and to such other
person as the
Company may instruct, monthly written statements of the activities
of and
amounts in the Trust Account reflecting all receipts and
disbursements of the
Trust Account; and
(i) Commence liquidation of the Trust Account only after
receipt of
and only in accordance with the terms of a letter ("Termination
Letter"), in a
form substantially similar to that attached hereto as either
Exhibit A or
Exhibit B, signed on behalf of the Company by its President or
Chairman of the
Board and Secretary or Assistant Secretary, and complete the
liquidation of the
Trust Account and distribute the Property in the Trust Account only
as directed
in the Termination Letter and the other documents referred to
therein.
2. Agreements and Covenants of the Company. The Company hereby
agrees and
covenants to:
(a) Give all instructions to the Trustee hereunder in
writing, signed
by the Company's President or Chairman of the Board. In addition,
except with
respect to its duties under paragraph 1(i) above, the Trustee shall
be entitled
to rely on, and shall be protected in relying on, any verbal or
telephonic
advice or instruction which it in good faith believes to be given
by any one of
the persons authorized above to give written instructions, provided
that the
Company shall promptly confirm such instructions in writing;
(b) Hold the Trustee harmless and indemnify the Trustee
from and
against, any and all expenses, including reasonable counsel fees
and
disbursements, or loss suffered by the Trustee in connection with
any action,
suit or other proceeding brought against the Trustee involving any
claim, or in
connection with any claim or demand which in any way arises out of
or relates to
this Agreement, the services of the Trustee hereunder, or the
Property or any
income earned from investment of the Property, except for expenses
and losses
resulting from the Trustee's gross negligence or willful
misconduct. Promptly
after the receipt by the Trustee of notice of demand or claim or
the
commencement of any action, suit or proceeding, pursuant to which
the Trustee
intends to seek indemnification under this paragraph, it shall
notify the
Company in writing of such claim (hereinafter referred to as the
"Indemnified
Claim"). The Trustee shall have the right to conduct and manage the
defense
against such Indemnified Claim, provided, that the Trustee shall
obtain the
consent of the Company with respect to the selection of counsel,
which consent
shall not
2
be unreasonably withheld. The Trustee may not agree to settle any
Indemnified
Claim without the prior written consent of the Company. The Company
may
participate in such action with its own counsel; and
(c) Pay the Trustee an initial acceptance fee of $1,000
and an annual
fee of $3,000 (it being expressly understood that the Property
shall not be used
to pay such fee). The Company shall pay the Trustee the initial
acceptance fee
and first year's fee at the consummation of the IPO and thereafter
on the
anniversary of the Effective Date. The Trustee shall refund to the
Company the
fee (on a pro rata basis) with respect to any period after the
liquidation of
the Trust Fund. The Company shall not be responsible for any other
fees or
charges of the Trustee except as may be provided in paragraph 2(b)
hereof (it
being expressly understood that the Property shall not be used to
make any
payments to the Trustee under such paragraph).
3. Limitations of Liability. The Trustee shall have no
responsibility or
liability to:
(a) Take any action with respect to the Property, other
than as
directed in paragraph 1 hereof and the Trustee shall have no
liability to any
party except for liability arising out of its own gross negligence
or willful
misconduct;
(b) Institute any proceeding for the collection of any
principal and
income arising from, or institute, appear in or defend any
proceeding of any
kind with respect to, any of the Property unless and until it shall
have
received instructions from the Company given as provided herein to
do so and the
Company shall have advanced or guaranteed to it funds sufficient to
pay any
expenses incident thereto;
(c) Change the investment of any Property, other than in
compliance
with paragraph 1(c);
(d) Refund any depreciation in principal of any Property;
(e) Assume that the authority of any person designated by
the Company
to give instructions hereunder shall not be continuing unless
provided otherwise
in such designation, or unless the Company shall have delivered a
written
revocation of such authority to the Trustee;
(f) The other parties hereto or to anyone else for any
action taken or
omitted by it, or any action suffered by it to be taken or omitted,
in good
faith and in the exercise of its own best judgment, except for its
gross
negligence or willful misconduct. The Trustee may rely conclusively
and shall be
protected in acting upon any order, notice, demand, certificate,
opinion or
advice of counsel (including counsel chosen by the Trustee),
statement,
instrument, report or other paper or document (not only as to its
due execution
and the validity and effectiveness of its provisions, but also as
to the truth
and acceptability of any information therein contained) which is
believed by the
Trustee, in good faith, to be genuine and to be signed or presented
by the
proper person or persons. The Trustee shall not be bound by
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